Sunday, July 9, 2017

GLO Airlines' fate is up in the air after the end of July

More than a year and a half after launching nonstop regional service from New Orleans, charter operator GLO Airlines has attracted a clientele of business travelers who long sought a way to get to major Mid-South cities without spending days in the car or wasting hours at hub airports during layovers.

Last year, in its first full year of operation, GLO transported about 32,300 passengers through Louis Armstrong New Orleans International Airport, where the startup airline is based, and it was on track to surpass that figure this year, court records show.

But now that's up in the air. It filed for bankruptcy in April and is accepting reservations only through the end of this month, leaving its fate uncertain. 

As a so-called "paper airline," GLO has a fleet of three leased 30-passenger Saab 340B commuter plans, but they are staffed by another company, Tennessee-based Corporate Flight Management.

That business relationship has soured. The two sides have sued each other in court, and GLO was nearly grounded in April after Corporate Flight Management tried to cut short their agreement, which is due to expire July 31.

In March, GLO sued CFM, alleging that one of its pilots negligently damaged a plane, causing "significant damages, including engine repairs, rental costs, maintenance fees and lost revenues."

In response, CFM claimed that its deal with GLO insulated it from liability for repair costs; it also denied the pilot was at fault.

CFM then notified GLO in April that the airline had breached its contract by falling behind on its payments, which CFM described in court records as part of a pattern of "cumulative and ongoing defaults."

As a result, the firm notified GLO and the U.S. Department of Transportation that its contract would be terminated after a 10-day grace period.

GLO, which disputed it was in default, filed for bankruptcy protection and asked a federal bankruptcy judge, Jerry Brown, to allow it to continue flying until July 31 so it would not lose "its principal source of revenue." Brown agreed.

FlyGLO LLC's bankruptcy petition listed assets and liabilities of between $10 million and $50 million each, with up to 49 creditors.

Now, GLO faces a deadline at the end of the month by which it has essentially to reach a new deal with Corporate Flight Management, which hires, trains and oversees the airline's pilots, or bring on another operator that's certified to fly its planes.

"It's obviously been quite a bit of a whirlwind," said GLO founder and CEO Trey Fayard, who manages about a dozen employees.

Another option would be acquiring a company that's already certified by the Federal Aviation Administration to fly the Swedish-built commuter planes. Perhaps a couple dozen companies would qualify, according to some estimates.

"There's no magic bullet," Fayard said. "You have to find a good, strong business, put your plan together and take over that business, while you are modifying the certificate to fit what your needs may be."

In the long term, GLO also could work toward earning its own certificate to operate its planes, but Fayard acknowledged it's a costly, time-consuming process that could take more than a year.

Since it started in late 2015, GLO has offered nonstop service from New Orleans to Shreveport; Little Rock, Arkansas; and Memphis, Tennessee. It later added flights to Huntsville, Alabama, and briefly to Fort Walton Beach, Florida.

At the time it began, some local business executives said GLO's entry into the market highlighted an area where the New Orleans airport had room to grow: targeting underserved regional cities that would attract business people and others eager for an alternative to driving or multiple-stop flights.

After six years of planning, Fayard chose GLO's initial three destinations after extensive research, including driving to dozens of cities and airports in the South to gauge the potential demand for the service.

Fayard is the son of a prominent, well-connected attorney and longtime Democratic Party supporter Calvin Fayard; his sister, Caroline Fayard, was a Democratic U.S. Senate candidate in 2016.

Despite his company's uncertain fate, Fayard said GLO was moving ahead with scheduling beyond this month and has plans to add at least one new destination.

But first, he'll need someone to fly the planes.

Some aviation industry experts note the risks of relying on a third-party operator, saying it can make financial sense in the beginning but can hamper an airline's long-term growth.

"Anytime you're relying on outside services to provide your product, you are at the whim of their level of reliability and, ultimately, their costs," said Robert Mann, an airline consultant in New York.

1 comment:

Jim B said...

Too many layers of conflicting interest.

Likely to fail.